DISH Shoulders Aside T-Mobile with AT&T Deal

AT&T (NYSE: T) has shouldered aside T-Mobile US (Nasdaq: TMUS) as the chief provider of DISH Network’s (Nasdaq: DISH) mobile virtual network operator (MVNO) services Boost, Ting, and Republic Wireless. (MVNOs don't own the networks their services use.) According to a recent filing with the U.S. Securities and Exchange Commission (SEC), AT&T is now "the primary network services provider for DISH."

The 10-year, $5-billion agreement is non-exclusive and does not override DISH’s deal with T-Mobile, which reportedly doesn’t expire until 2027. But DISH has committed to providing a minimum, unspecified percentage of its MVNO customers to AT&T. And some of those customers may presently be relying on the T-Mobile network.

The news is a slap in the face to T-Mobile but a boon to AT&T, which also will gain access to DISH’s sizable pool of licensed spectrum for use in providing services from AT&T or DISH.

Upsides for Both AT&T and DISH

The deal, announced yesterday, could have far-reaching effects. For DISH, it provides relief from what’s become a difficult relationship with T-Mobile (more on that momentarily). It also opens the way for DISH to continue to support its MVNO customers without distracting from DISH’s efforts to create its own 5G network.

Those efforts have included a deal with AWS announced earlier this year that will give DISH a cloud-native Open RAN infrastructure for its 5G network. That move reflects a general trend in the industry: AT&T recently committed to shifting its 5G network core to Microsoft’s Azure. And Verizon (NYSE: VZ) will use IBM’s Red Hat as the basis for its 5G core.

There has also been much speculation by observers that the new AT&T/DISH deal could presage a merger between AT&T’s DirecTV business and DISH, which compete in the satellite TV market. AT&T still owns 70% of DirecTV via a joint venture with private equity firm TPG announced earlier this year. But AT&T’s recent sale of WarnerMedia to Discovery Inc. indicates the carrier is willing to divest itself of entertainment businesses that distract from its 5G mission. And news reports state DISH co-founder and board chair Charlie Ergen has long favored a DISH/DirecTV merger. Indeed, he tried unsuccessfully to sell DISH to AT&T in 2007.

For AT&T, the deal with DISH not only brings in added revenue, it presents opportunities to broaden the field of services DISH may send AT&T’s way in the future. Also, access to DISH’s spectrum assets should help AT&T to realize its own 5G ambitions, which include deploying 40 MHz of the 80 MHz it acquired during the U.S. Federal Communications Commission’s (FCC) recent C-band spectrum auction.

Ironically, DISH gained some of its spectrum as part of the complicated T-Mobile/Sprint antitrust case, in which a relationship was encouraged between DISH and T-Mobile in order to equip DISH to become a fourth major carrier in the U.S. At the time, DISH spent about $3.5 billion for the spectrum in a deal that also included $1.5 billion for Sprint’s mobile prepaid services businesses, including Boost.

What Went Wrong with T-Mobile?

Reports say the relationship between DISH and T-Mobile has suffered since the Sprint merger. For its part, DISH opposes T-Mobile’s decision to shutter its 3G network by January 1, 2022, sooner than originally planned. Closing up 3G shop, DISH fears, would hinder customers still attached to 3G cellphones.

According to at least one report, bad blood between the two companies also includes accusations by Dish that T-Mobile’s approach to limiting the use of power for Citizens Broadband Radio Service (CBRS) amounts to anti-competitive behavior. “T-Mobile wants to … prevent smaller providers and new entrants from using more flexible power levels that could better position them to compete with incumbents like T-Mobile,” said DISH in its letter to the FCC.

For its part, T-Mobile has attacked DISH with similar cries about bad behavior. And though public sentiment seems to side with the smaller company, DISH’s FCC record isn’t unblemished. In 2020, for example, DISH ran afoul of the FCC when two companies bidding on discounted spectrum as small, independent entities were reportedly exposed as being fully funded by DISH.

With tempers flaring on both sides, the deal with AT&T should surprise no one. But it could lead to acceleration of both DISH and AT&T’s plans to focus on spectrum as a tool of 5G. And by selling DirecTV, AT&T could further extricate itself from a direction that by all accounts has been a hindrance for the carrier.

In midday trading today, DISH shares were selling at $41.49, up 6.25% (+2.44); AT&T shares were trading at $28.04, up 0.88% (+0.24); T-Mobile shares were trading at $144.79, up 0.12% (+0.18).